You'd be hard pressed to find a more underrated band in the American underground than Silkworm. Since their formation in 1987, they've survived the loss of then-frontman Joel RL Phelps (who went on to a solo career of some distinction), record-label switches, and relocations from Montana to Seattle to Chicago. They've always had famous friends, collaborating with Pavement's Stephen Malkmus in a side project called the Crust Brothers and working frequently with acerbic punk legend Steve Albini in the studio, but the fame has always eluded Silkworm for some reason. Looking at their recorded history, which includes a streak of uniformly excellent albums like Developer (1997), Lifestyle (2000), and last year's near-perfect Italian Platinum, it's amazing to me that they've never really been embraced by the press or fans the way that they deserve to be.

I suspect it has something to do with the band's distinctive blend of classic-rock songwriting and angular, post-punk chops. Too traditionalist for the Chicago post-rock scene they currently reside near, too strange for the Uncle Tupelo crowd, Silkworm stand apart as one of the few bands that can evoke comparisons to both Neil Young and Gang of Four. Tellingly, Italian Platinum (their last full-length album), featured appearances by both alt-country oddball Kelly Hogan and Matt Kadane, the leader of glacial art-rockers Bedhead and the New Year.

You Are Dignified, the group's new EP of acoustic cover songs, likewise unites such divergent songs as Shellac's caustic "Prayer to God" (otherwise known as "Fucking Kill Him") and Robbie Fulk's country anthem "Let's Kill Saturday Night."

The "covers album" concept has been used and abused by a great many bands in the last decade, groups that are usually willing to trot out uninspired versions of '70s and '80s classics to fulfill whatever major-label deal they've been saddled with. Silkworm, working with the legendary punk label Touch & Go, are under no such pressure, and thus deliver one of the best records of their career, and one of the better covers collections I've heard.

Instead of doing the usual rehash of classic-rock warhorses that we're used to, Silkworm select songs that are, by and large, as obscure as their own work. Since most of the artists covered are personal friends and sometimes collaborators, the band seems driven to do them proud with stripped-down arrangements that feature only acoustic guitar and mandolin.

Nearly every song seems transformed by the deceptively simple treatment. Even longtime Shellac fans will hear "Prayer to God" with new ears, as skeletal guitar chords and drummer Michael Dahlquist's shaky monotone refigure the scorching rocker as a Louvin Brothers murder ballad for a more violent age. Pavement's "And Then..." (an obscure alternate version of Terror Twilight's "The Hexx" from the b-side of the "Carrot Rope" seven-inch) is a gorgeous slice of country rock, either the weirdest song Gram Parsons never recorded or an indication of what might have happened if Stephen Malkmus had written "Range Life" and then decided to strike out for the hills.

The band wisely rescues Robbie Fulk's brilliant "Let's Kill Saturday Night" from the busy, muddled production that marred his major-label debut, revealing the song as a simple, stalwart pledge of working-class pride. Andy Cohen sings, "Well every dollar I make/ Is a buck I owe/ And a 40-hour week/ Leaves 10 to blow," drawing a parallel between the song's workaday protagonist and the members of the band itself, who, 15 years into their career, still have day jobs that support their rock habit.

At both the actual and emotional center of the record is their version of Bedhead's "Lepidoptera." Played at a stately pace, the song reduces the epic slowcore of the original to its core; adorned only by loving brushes of mandolin and guitar, it's a Celtic ballad that recalls the gentlest work of Richard Thompson. As the song ends abruptly with the line "My guardian angel has finally arrived" and the last chord hangs in the air, it's hard not to give a thought to the mortality of bands (Bedhead, still mourned by a legion of fans, broke up in 1998) and the people in them.

Ultimately, a good covers record is like a mix-tape made for you by an artist. Silkworm has made a great one. By juxtaposing such disparate artists' songs, and by breaking down the compositions to their most basic elements, they show that the heart and soul of great music is all the same  whether it's Shellac's pummeling minimalism or Nina Nastasia's subtle dirges. Although "MTV Unplugged" helped turn the "acoustic album" into just another marketing scheme, You Are Dignified gives back its dignity.